CMA Launches 'Drip Pricing' Probe into Trainline, Virgin Atlantic, and RED Driving School

The UK's Competition and Markets Authority (CMA) has announced the launch of formal investigations into Trainline, Virgin Atlantic, and RED Driving School, major providers of transport and education services, over concerns regarding their 'drip pricing' practices. The watchdog suspects these companies may be displaying misleadingly low prices to consumers by not including all mandatory fees upfront when selling train tickets, holiday packages, and driving lessons.

The CMA's investigations are part of a broader crackdown on 'drip pricing,' defined as the practice where an initial price for a product or service is presented, only for additional mandatory charges to be added later in the buying process. Specifically, the CMA is examining whether Trainline included all mandatory transaction fees, ranging from £0.59 to £2.79, and a £1.50 booking fee for train and coach tickets, in its upfront prices. Virgin Atlantic is under scrutiny for allegedly not including mandatory resort fees and local taxes, which can amount to hundreds of pounds, in the upfront prices for package holidays. Meanwhile, RED Driving School is being investigated over how it displayed a mandatory booking fee and a 'digital' fee, potentially £7 or more per booking. All three firms had previously received advisory letters from the CMA reminding them of their consumer law obligations, but the regulator stated that concerns about their pricing practices persist.

The announcement of these investigations immediately impacted the markets. Trainline, the only listed company among the three, saw its shares plummet by as much as 14% to 16% in early trading following the news, reflecting investor reaction to potential regulatory risks. If the CMA finds that consumer law has been broken, it has the power to order businesses to pay compensation to affected customers and impose fines of up to 10% of their global turnover. This potential for significant penalties could place considerable pressure on the companies' financial statements and profitability.

This move by the CMA is part of its wider enforcement campaign against misleading pricing practices in the UK. The authority emphasizes that 'drip pricing' not only exposes consumers to unexpected costs or forces them to calculate the true cost themselves but also distorts competition by making some firms appear cheaper than rivals. Utilizing strengthened powers under the Digital Markets, Competition and Consumers Act 2024, the CMA has previously issued fines and secured customer refunds from companies like StubHub, AA, and BSM Driving Schools for similar infringements. These actions aim to ensure greater pricing transparency for consumers, particularly at a time when many households are grappling with cost-of-living pressures.

The investigations are currently in their early stages, and the CMA has not yet reached any conclusions as to whether the firms have broken the law. Trainline stated that it has been proactively engaging with the CMA for several months and is taking steps to enhance the presentation of certain fees. Virgin Atlantic affirmed that mandatory fees are indicated at multiple stages throughout the booking journey and pledged full cooperation with the regulator. RED Driving School also expressed its commitment to transparency and continued engagement with the CMA. The CMA anticipates its initial evidence-gathering phase to continue until January 2027, with further updates on the cases expected thereafter.